Congruence Capital Publishes Theory of Change
Introduction
Our Theory of Change is predicated on one core concept: undervalued small-cap public companies are often sustainability laggards. We invest in those companies with substantial upside potential and collaborate with management to identify and implement measurable improvements in social and environmental impacts that further enhance financial performance. This creates the potential for delivering alpha uncorrelated with overall market performance. By demonstrating both measurable impact and strong financial returns, we expand the opportunity for impact investing in public equities and demonstrate the congruence of sustainability with superior risk-adjusted financial returns.
Impact Context
From decarbonization and biodiversity preservation to human health and well-being, companies are essential partners in creating a sustainable future. On the topic of climate change alone, energy use in industry is the largest contributor of global greenhouse gases, yet most companies have been slow to make meaningful change. Over the last decade, the impact investing movement has grown exponentially, but it has been primarily focused on private equity and early-stage venture capital investments. There have been far fewer models for impact investing in the vastly larger pool of capital in public equities. Most public market funds that employ concepts of sustainability in their investment process simply offer negative or positive screens that direct capital away from harmful industries or toward companies that make a positive contribution or score well on ESG ratings – but neither approach demonstrates measurable impact attributable to the investment.
Congruence’s Investment Strategy is Differentiated
Our team combines decades of experience in security analysis and stock selection with equally world-class expertise in sustainability consulting. This enables us to pursue an impact-driven influence investing strategy that identifies promising but undervalued companies, then works with management to assist in identifying and implementing better social and environmental practices with bottom line benefits. We also connect companies with specialized consulting firms and early-stage technology companies, giving them the connections and support they need to advance their sustainability maturity. Our approach is intended to deliver both superior financial performance and measurable impact on our portfolio companies’ sustainability metrics, consistent with the GIIN theory of change for impact investing in public equities.
Full Theory of Change can be found in the link below.